Battery cell mega-factory | Northvolt eases off, up to 18 months late in Quebec

The slowdown at Northvolt will have repercussions as far as Quebec. The start-up of its mega-factory of battery cells, on the South Shore of Montreal, planned for 2027, will be delayed, was able to confirm The Press. Aware of the matter, the Legault government believes that the delay could reach up to 18 months.

Following a strategic review underway within the young Swedish company – the results of which are expected this autumn – “there will be a review of the timetable” for the launch of production, confirms a person close to the matter who is not authorised to speak publicly.

In a short statement to The PressNorthvolt indicated that the current assessment of the project “could result in a reassessment of the schedules”: “The engineering and design of the complex are continuing and the site preparation work continues.”

Several factors explain this delay. The process to obtain the necessary permits for the preparation of the land and the excavation of the site on the gigantic piece of land that straddles the municipalities of Saint-Basile-le-Grand and McMasterville took much longer than Northvolt had anticipated.

The multinational must obtain a dozen government authorizations to carry out its project. According to our information, the attention generated by an accelerated authorization process that does not require an examination by the Bureau d’audiences publiques sur l’environnement (BAPE) has led to a certain reluctance during the project analyses. This is said to have slowed down the processing of the file.

Quebec is not surprised by the upcoming announcement. In fact, the Minister of Economy, Innovation and Energy, Pierre Fitzgibbon, does not hesitate to anticipate what should be announced in a few weeks.

Announced with great fanfare on September 28, 2023 and presented by the Legault government as the largest private industrial project in the history of the province, construction of the Northvolt complex – a project valued at $7 billion and financed by Quebec and Ottawa – began last spring. According to Mr. Fitzgibbon, the work will continue. A temporary shutdown does not seem to be on the table.

Inevitable braking

The evolution of the electric vehicle market is not unrelated to Northvolt’s readjustment. A drop in sales growth of these vehicles in recent months is leading major manufacturers to review their development strategy for the sector and reduce their production rate.

The phenomenon is global. Like many battery materials manufacturers, Northvolt has had to overcome several challenges over the past year. The company is still struggling to ramp up production of battery cells at its first megafactory in northern Sweden.

This had prompted BMW to cancel an order for battery cells estimated at 3 billion last June because the Swedish manufacturer was struggling to meet certain terms of the order announced in 2020 with the German carmaker.

In this context, Northvolt’s senior management had to face the facts. The expansion had been “a little too aggressive,” its co-founder and CEO, Peter Carlsson, admitted in a series of interviews with European media last July.

The situation in which the Swedish cell finds itself can also be observed south of the border. According to a recent review by the Financial Timesalmost 40% of the projects announced under theInflation Reduction Act (IRA) – the Biden administration’s generous industrial policy to lay the foundations for a battery industry in the United States – are delayed or on hold.

There are 114 major projects that represent investments of around 230 billion US dollars, according to the economic daily. Depending on the projects, delays can sometimes reach several years.

Large sums at stake

Any delay on Montreal’s South Shore will prove costly for Northvolt. To convince the young company not to set up in the United States, Quebec and Ottawa have agreed to replicate what Washington is offering with the IRA, which subsidizes part of the production of each battery.

The two levels of government could put up to $4.6 billion on the table. Nothing has been disbursed yet.

These subsidies will be paid only once production is up and running. And in principle, the American measures end in 2032. The deadline is the same on this side of the border.

“In the United States, the IRA is decreasing from 2030,” he explained to The Press Deputy Minister of the Economy Jonathan Gignac said last March. “If there is a lag in production [chez Northvolt]the rate reduction is in the same place as well as the end of the aid.

In other words, the longer it takes a company to produce cells, the narrower its window to take full advantage of production subsidies.

Read “Interview with Pierre Fitzgibbon: The battery industry comes back down to earth”